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An agricultural subsidy (also called an agricultural incentive) is a government incentive paid to
agribusiness Agribusiness is the industry, enterprises, and the field of study of value chains in agriculture and in the bio-economy, in which case it is also called bio-business or bio-enterprise. The primary goal of agribusiness is to maximize profit ...
es, agricultural organizations and
farm A farm (also called an agricultural holding) is an area of land that is devoted primarily to agricultural processes with the primary objective of producing food and other crops; it is the basic facility in food production. The name is used f ...
s to supplement their income, manage the supply of agricultural
commodities In economics, a commodity is an economic good, usually a resource, that has full or substantial fungibility: that is, the market treats instances of the good as equivalent or nearly so with no regard to who produced them. The price of a co ...
, and influence the cost and supply of such commodities. Examples of such commodities include: wheat, feed grains (grain used as fodder, such as
maize Maize ( ; ''Zea mays'' subsp. ''mays'', from es, maíz after tnq, mahiz), also known as corn ( North American and Australian English), is a cereal grain first domesticated by indigenous peoples in southern Mexico about 10,000 years ago. T ...
or corn, sorghum, barley and oats), cotton, milk, rice, peanuts, sugar, tobacco, oilseeds such as soybeans and meat products such as beef, pork, and
lamb and mutton Lamb, hogget, and mutton, generically sheep meat, are the meat of domestic sheep, ''Ovis aries''. A sheep in its first year is a lamb and its meat is also lamb. The meat from sheep in their second year is hogget. Older sheep meat is mutton. Gen ...
. A 2021 study by the UN
Food and Agriculture Organization The Food and Agriculture Organization of the United Nations (FAO)french: link=no, Organisation des Nations unies pour l'alimentation et l'agriculture; it, Organizzazione delle Nazioni Unite per l'Alimentazione e l'Agricoltura is an intern ...
found $540 Billion was given to farmers every year between 2013 and 2018 in global subsidies. The study found these subsidies are harmful in numerous ways. In wealthy countries, they damage health by promoting the overconsumption of meat. In under-developed countries they encourage overconsumption of low-nutrition staples. Subsidies also contribute to the climate crisis, by encouraging deforestation; and they also drive inequality because smallholder farmers, many of whom are women, are excluded. According to UNDP head, Achim Steiner, redirecting subsidies would boost the livelihoods of 500 million smallholder farmers worldwide by creating a more level playing field with large-scale agricultural enterprises. A separate report, by the World Resources Institute in August 2021, said without reform, farm subsidies “will render vast expanses of healthy land useless”.


History

On the earliest known interventions in farming markets was the English Corn Laws, which regulated the import and export of grain in Great Britain and Ireland for centuries. The laws were repealed in 1846.Daniel A. Sumner
Agricultural Subsidy Programs
/ref> Agricultural subsidies in the twentieth century were originally designed to stabilize markets, help low-income farmers, and aid rural development. In the United States, President
Franklin D. Roosevelt Franklin Delano Roosevelt (; ; January 30, 1882April 12, 1945), often referred to by his initials FDR, was an American politician and attorney who served as the 32nd president of the United States from 1933 until his death in 1945. As th ...
signed the
Agricultural Adjustment Act The Agricultural Adjustment Act (AAA) was a United States federal law of the New Deal era designed to boost agricultural prices by reducing surpluses. The government bought livestock for slaughter and paid farmers subsidies not to plant on part ...
, as part of the
New Deal The New Deal was a series of programs, public work projects, financial reforms, and regulations enacted by President Franklin D. Roosevelt in the United States between 1933 and 1939. Major federal programs agencies included the Civilian Cons ...
in 1933. At the time the economy was in a severe depression and farmers were experiencing the lowest agricultural prices since the 1890s. The plan was to increase prices for a range of agricultural products by paying farmers to destroy some of their livestock or not use some of their land - known as land idling. This led to a reduction in supply and smaller agricultural surpluses. Initially seven products were controlled: (
corn Maize ( ; ''Zea mays'' subsp. ''mays'', from es, maíz after tnq, mahiz), also known as corn (North American and Australian English), is a cereal grain first domesticated by indigenous peoples in southern Mexico about 10,000 years ago. The ...
,
wheat Wheat is a grass widely cultivated for its seed, a cereal grain that is a worldwide staple food. The many species of wheat together make up the genus ''Triticum'' ; the most widely grown is common wheat (''T. aestivum''). The archaeologica ...
,
cotton Cotton is a soft, fluffy staple fiber that grows in a boll, or protective case, around the seeds of the cotton plants of the genus ''Gossypium'' in the mallow family Malvaceae. The fiber is almost pure cellulose, and can contain minor pe ...
,
rice Rice is the seed of the grass species ''Oryza sativa'' (Asian rice) or less commonly '' Oryza glaberrima'' (African rice). The name wild rice is usually used for species of the genera '' Zizania'' and ''Porteresia'', both wild and domesticate ...
, peanuts,
tobacco Tobacco is the common name of several plants in the genus ''Nicotiana'' of the family Solanaceae, and the general term for any product prepared from the cured leaves of these plants. More than 70 species of tobacco are known, but the chie ...
and
milk Milk is a white liquid food produced by the mammary glands of mammals. It is the primary source of nutrition for young mammals (including breastfed human infants) before they are able to digest solid food. Immune factors and immune-modul ...
). Unlike traditional subsidies that promote the growth of products, this process boosted agricultural prices by limiting the growth of these crops. In Europe, Common Agricultural Policy (CAP) was launched in 1962 to improve agricultural productivity. According to the
European Commission The European Commission (EC) is the executive of the European Union (EU). It operates as a cabinet government, with 27 members of the Commission (informally known as "Commissioners") headed by a President. It includes an administrative body ...
, the act aims to * Support farmers and improve agricultural productivity, so that consumers have a stable supply of affordable food * Ensure that
European Union The European Union (EU) is a supranational political and economic union of member states that are located primarily in Europe. The union has a total area of and an estimated total population of about 447million. The EU has often been ...
(EU) farmers can make a reasonable living * Help tackling climate change and the sustainable management of natural resources * Maintain rural areas and landscapes across the EU * Keep the rural economy alive promoting jobs in farming, agri-foods industries and associated sectors


By region


Canada

Canadian agricultural subsidies are currently controlled by
Agriculture and Agri-Food Canada Agriculture and Agri-Food Canada (AAFC; sometimes Ag-Canada; french: Agriculture et Agroalimentaire Canada)''Agriculture and Agri-Food Canada'' is the applied title under the Federal Identity Program; the legal title is Department of Agriculture ...
. Financial subsidies are offered through the Canadian Agricultural Partnership Programs. The Canadian Agricultural Partnership began in April 2018 and is planned to take place over five years with a combined federal, provincial and territorial investment of three billion dollars. Some programs offered surround issues including AgriAssurance, agricultural leveraging programs, promoting diversity in agriculture, crop and livestock insurance, marketing activities, risk mitigation, and more. Before the Canadian Agricultural Partnership, agricultural subsidies were organized under the Growing Forward 2 partnership from 2013 to 2018.


European Union

In 2010, the EU spent €57 billion on agricultural development, of which €39 billion was spent on direct subsidies. Agricultural and fisheries subsidies form over 40% of the EU budget. Since 1992 (and especially since 2005), the EU's Common Agricultural Policy has undergone significant change as subsidies have mostly been decoupled from production. The largest subsidy is the ''
Single Farm Payment The Single Farm Payment is an agricultural subsidy paid to farmers in the EU. History Historically, the EU's Common Agricultural Policy (CAP) emphasised direct subsidies for agricultural produce. To reduce price distortion, the connection betwee ...
''.


Malawi

Increases in food and fertilizer prices have underlined the vulnerability of poor urban and rural households in many developing countries, especially in Africa, renewing policymakers' focus on the need to increase staple food crop productivity. A study by the
Overseas Development Institute ODI (formerly the 'Overseas Development Institute') is a global affairs think tank, founded in 1960. Its mission is "to inspire people to act on injustice and inequality through collaborative research and ideas that matter for people and the ...
evaluates the benefits of the Malawi Government Agricultural Inputs Subsidy Programme, which was implemented in 2006–2007 to promote access to and use of fertilizers in both maize and tobacco production to increase agricultural productivity and food security. The subsidy was implemented by means of a coupon system which could be redeemed by the recipients for
fertilizer A fertilizer (American English) or fertiliser (British English; see spelling differences) is any material of natural or synthetic origin that is applied to soil or to plant tissues to supply plant nutrients. Fertilizers may be distinct from ...
types at approximately one-third of the normal cash price. According to policy conclusions of the
Overseas Development Institute ODI (formerly the 'Overseas Development Institute') is a global affairs think tank, founded in 1960. Its mission is "to inspire people to act on injustice and inequality through collaborative research and ideas that matter for people and the ...
the voucher for coupon system can be an effective way of rationing and targeting subsidy access to maximize production and economic and social gains. Many practical and political challenges remain in the program design and implementation required to increase efficiency, control costs, and limit patronage and fraud.


New Zealand

New Zealand is reputed to have the most open agricultural markets in the world after radical reforms started in 1984 by the Fourth Labour Government stopped all subsidies.
In 1984 New Zealand's Labor government took the dramatic step of ending all farm subsidies, which then consisted of 30 separate production payments and export incentives. This was a truly striking policy action, because New Zealand's economy is roughly five times more dependent on farming than is the U.S. economy, measured by either output or employment. Subsidies in New Zealand accounted for more than 30 percent of the value of production before reform, somewhat higher than U.S. subsidies today. And New Zealand farming was marred by the same problems caused by U.S. subsidies, including
overproduction In economics, overproduction, oversupply, excess of supply or glut refers to excess of supply over demand of products being offered to the market. This leads to lower prices and/or unsold goods along with the possibility of unemployment. The d ...
,
environmental degradation Environmental degradation is the deterioration of the environment through depletion of resources such as quality of air, water and soil; the destruction of ecosystems; habitat destruction; the extinction of wildlife; and pollution. It is ...
and inflated land prices.
As the country is a large agricultural exporter, continued subsidies by other countries are a long-standing bone of contention, with New Zealand being a founding member of the 20-member Cairns Group fighting to improve
market access In international trade, market access is a company's ability to enter a foreign market by selling its goods and services in another country. Market access is not the same as free trade, because market access is normally subject to conditions or req ...
for exported agricultural goods.


United States

The
Farm Security and Rural Investment Act of 2002 The Farm Security and Rural Investment Act of 2002, also known as the 2002 Farm Bill, includes ten titles, addressing a great variety of issues related to agriculture, ecology, energy, trade, and nutrition. This act has been superseded by the ...
, also known as the 2002
Farm Bill In the United States, the farm bill is the primary agricultural and food policy instrument of the federal government. Every five years, Congress deals with the renewal and revision of the comprehensive omnibus bill. Johnson, R. and Monke, J. (8 ...
, addressed a great variety of issues related to
agriculture Agriculture or farming is the practice of cultivating plants and livestock. Agriculture was the key development in the rise of sedentary human civilization, whereby farming of domesticated species created food surpluses that enabled people t ...
,
ecology Ecology () is the study of the relationships between living organisms, including humans, and their physical environment. Ecology considers organisms at the individual, population, community, ecosystem, and biosphere level. Ecology overlaps ...
,
energy In physics, energy (from Ancient Greek: ἐνέργεια, ''enérgeia'', “activity”) is the quantitative property that is transferred to a body or to a physical system, recognizable in the performance of work and in the form of h ...
,
trade Trade involves the transfer of goods and services from one person or entity to another, often in exchange for money. Economists refer to a system or network that allows trade as a market. An early form of trade, barter, saw the direct exch ...
, and
nutrition Nutrition is the biochemical and physiological process by which an organism uses food to support its life. It provides organisms with nutrients, which can be metabolized to create energy and chemical structures. Failure to obtain sufficient ...
. Signed after the
September 11th attacks The September 11 attacks, commonly known as 9/11, were four coordinated suicide terrorist attacks carried out by al-Qaeda against the United States on Tuesday, September 11, 2001. That morning, nineteen terrorists hijacked four commerc ...
of 2001, the act directs approximately $16.5 billion of government funding toward agricultural subsidies each year. This funding has had a great effect on the production of grains, oilseeds, and upland cotton. The United States paid allegedly around $20 billion in 2005 to farmers in direct subsidies as "farm income stabilization" via farm bills. Overall agricultural subsidies in 2010 were estimated at $172 billion by a European agricultural industry association; however, the majority of this estimate consists of food stamps and other consumer subsidies, so it is not comparable to the 2005 estimate. Agricultural policies of the United States are changed, incrementally or more radically, by Farm Bills that are passed every five years or so. Statements about how the program works might be right at one point in time, at best, but are probably not sufficient for assessing agricultural policies at other points in time. For example, a large part of the support to program crops has not been linked directly to current output since the
Federal Agriculture Improvement and Reform Act of 1996 The Federal Agriculture Improvement and Reform Act of 1996 (P.L. 104-127), known informally as the Freedom to Farm Act, the FAIR Act, or the 1996 U.S. Farm Bill, was the omnibus 1996 farm bill that, among other provisions, revises and simplifies d ...
(P.L. 104-127). Instead, these payments were tied to historical entitlement, not current planting. For example, it is incorrect to attribute a payment associated with wheat base area to wheat production now because that land might be allocated to any of a number of permitted uses, including held idle. Over time, successive Farm Bills have linked these direct payments to market prices or revenue, but not to production. In contrast, some programs, like the Marketing Loan Program that can create something of a floor price that producers receive per unit sold, are tied to production. That is, if the price of wheat in 2002 was $3.80, farmers would get an extra 58¢ per bushel (52¢ plus the 6¢ price difference). Fruit and vegetable crops are not eligible for subsidies. Corn was the top crop for subsidy payments prior to 2011. The
Energy Policy Act of 2005 The Energy Policy Act of 2005 () is a federal law signed by President George W. Bush on August 8, 2005, at Sandia National Laboratories in Albuquerque, New Mexico. The act, described by proponents as an attempt to combat growing energy proble ...
mandated that billions of gallons of ethanol be blended into vehicle fuel each year, guaranteeing demand, but US corn ethanol subsidies were between $5.5 billion and $7.3 billion per year. Producers also benefited from a federal subsidy of 51 cents per gallon, additional state subsidies, and federal crop subsidies that had brought the total to 85 cents per gallon or more. However, the federal ethanol subsidy expired 31 December 2011. (US corn-ethanol producers were shielded from competition from cheaper Brazilian sugarcane-ethanol by a 54-cent-per-gallon
tariff A tariff is a tax imposed by the government of a country or by a supranational union on imports or exports of goods. Besides being a source of revenue for the government, import duties can also be a form of regulation of foreign trade and po ...
; however, that tariff also expired 31 December 2011.)


Asia

Farm subsidies in Asia remain a point of contention in global trade talks.


China

In 2016, China provided $212 billion in agricultural subsidies. In 2018, China increased their subsidies for soybean farmers in their northeastern provinces. Corn farmers, however, received reduced subsidies due to Beijing's 2017 policy that set out to reduce its huge stockpile. Soybean farmers in Liaoning, Jilin, Heilongjiang, and Inner Mongolia provinces will receive more subsidies from Beijing than corn farmers. The cutting of corn acreage and the lifting of soybean acreage came in 2016 as a push from China to re-balance grain stocks. Subsidies for agriculture machinery and equipment will also be provided by Beijing to farmers.


Indonesia

In 1971, as a method of expanding the rice supply in Indonesia, the government began subsidizing fertilizer to farmers after the discovery and introduction of new, high-yielding rice varieties. In 2012, Indonesia provided $28 billion in agricultural subsidies.


Japan

Over the 2000s, Japan has been reforming its generous agricultural subsidy regime to support more business-oriented farmers. Yet, subsidies remain high in international comparison. In 2009, Japan paid US$46.5 billion in subsidies to its farmers, and continued state support of farmers in Japan remains a controversial topic. In 2012, Japan provided $65 billion in agricultural subsidies.


South Korea

South Korea has made attempts to reform its agricultural sector, despite resistance from vested interests. In 2012, South Korea provided approximately $20 billion in agricultural subsidies.


India

Agricultural subsidy in India primarily consists of subsidies like, fertilizer, irrigation, equipment, credit subsidy, seed subsidy, export subsidy etc. Subsidy on fertilizers is provided by the Central government whereas subsidy on water and irrigation is provided by the local State governments. Drawing on the most recent estimates, annual central government subsidies to farmers would be of the order of as the sum of fertilizer subsidies (, 2017/18), credit subsidies (, 2017/18), crop insurance subsidies (, 2018/19) and expenditures towards price support ( estimated for 2016/17). Total subsidies to farmers in India is in the range of $45–50 billion, to the tune of 2%-2.5% of GDP. But per farmer the subsidy just about touches $48 in India, compared to over $7,000 in the U.S.


Armenia

Direct subsidies, of the Ministry of Agriculture, include subsidies for fertilizers, improved seed, agricultural chemicals, and fuel. The purpose of subsidies is to aid the smallest farmers in the sector. In particular, the maximum loan size for interest subsidies is minimal, and only farms with less than 3 ha are eligible for fuel, fertilizer, chemical, and seed subsidies. For loans of up to 3 million drams (about US$6,185 at current exchange rates), subsidies decrease interest rates from 10%–12% to 4%–6% in an effort to support Armenia's smaller farms.


Impact of subsidies


Global food prices and international trade

Although some critics and proponents of the
World Trade Organization The World Trade Organization (WTO) is an intergovernmental organization that regulates and facilitates international trade. With effective cooperation in the United Nations System, governments use the organization to establish, revise, and e ...
have noted that export subsidies, by driving down the price of commodities, can provide cheap food for consumers in developing countries, low prices are harmful to farmers not receiving the subsidy. Because it is usually wealthy countries that can afford domestic subsidies, critics argue that they promote poverty in
developing countries A developing country is a sovereign state with a lesser developed industrial base and a lower Human Development Index (HDI) relative to other countries. However, this definition is not universally agreed upon. There is also no clear agree ...
by artificially driving down world crop prices. Generally, developing countries have a
comparative advantage In an economic model, agents have a comparative advantage over others in producing a particular good if they can produce that good at a lower relative opportunity cost or autarky price, i.e. at a lower relative marginal cost prior to trade. Compa ...
in producing agricultural goods, but low crop prices encourage developing countries to be dependent buyers of food from wealthy countries. So local farmers, instead of improving the agricultural and economic self-sufficiency of their home country, are forced out of the market and perhaps even off their land. This occurs as a result of a process known as " international dumping" in which subsidized farmers are able to "dump" low-cost agricultural goods on foreign markets at costs that un-subsidized farmers cannot compete with. Agricultural subsidies often are a common stumbling block in trade negotiations. In 2006, talks at the
Doha round The Doha Development Round or Doha Development Agenda (DDA) is the trade-negotiation round of the World Trade Organization (WTO) which commenced in November 2001 under then director-general Mike Moore. Its objective was to lower trade barriers ...
of WTO trade negotiations stalled because the US refused to cut subsidies to a level where other countries' non-subsidized exports would have been competitive. Others argue that a world market with farm subsidies and other
market distortion In neoclassical economics, a market distortion is any event in which a market reaches a market clearing price for an item that is substantially different from the price that a market would achieve while operating under conditions of perfect compet ...
s (as happens today) results in higher food prices, rather than lower food prices, as compared to a free market. In 2002
Mark Malloch Brown George Mark Malloch Brown, Baron Malloch-Brown (born 16 September 1953) is a British diplomat, communications consultant, journalist and former politician serving as president of Open Society Foundations since 2021, having previously served as ...
, former head of the
United Nations Development Programme The United Nations Development Programme (UNDP)french: Programme des Nations unies pour le développement, PNUD is a United Nations agency tasked with helping countries eliminate poverty and achieve sustainable economic growth and human de ...
, estimated that farm subsidies cost poor countries about US$50 billion a year in lost agricultural exports:
It is the extraordinary distortion of global trade, where the West spends $360 billion a year on protecting its agriculture with a network of subsidies and tariffs that costs developing countries about US$50 billion in potential lost agricultural exports. Fifty billion dollars is the equivalent of today's level of development assistance.


Poverty in developing countries

The impact of agricultural subsidies in developed countries upon developing-country farmers and
international development International development or global development is a broad concept denoting the idea that societies and countries have differing levels of economic or human development on an international scale. It is the basis for international classifications ...
is well documented. Agricultural subsidies can help drive prices down to benefit consumers, but also mean that unsubsidised developing-country farmers have a more difficult time competing in the world market; and the effects on poverty are particularly negative when subsidies are provided for crops that are also grown in developing countries since developing-country farmers must then compete directly with subsidised developed-country farmers, for example in cotton and sugar.Agricultural Subsidies in the WTO Green Box
, ICTSD, September 2009.
The IFPRI has estimated in 2003 that the impact of subsidies costs developing countries $24 billion in lost incomes going to agricultural and agro-industrial production; and more than $40Bn is displaced from net agricultural exports. Moreover, the same study found that the least developed countries have a higher proportion of GDP dependent upon agriculture, at around 36.7%, thus may be even more vulnerable to the effects of subsidies. It has been argued that subsidised agriculture in the developed world is one of the greatest obstacles to economic growth in the developing world; which has an indirect impact on reducing the income available to invest in rural infrastructure such as health, safe water supplies and electricity for the rural poor. The total amount of subsidies that go towards agriculture in OECD countries far exceeds the amount that countries provide in
development aid Development aid is a type of foreign/international/overseas aid given by governments and other agencies to support the economic, environmental, social, and political development of developing countries. Closely-related concepts include: develop ...
. In the case of Africa, it is estimated that a 1% increase in its total agricultural exports could lift its GDP by $70 billion, nearly five times what the region is provided in total foreign aid.


Haiti and US rice imports

Haiti is an excellent example of a developing country negatively affected by agricultural subsidies in the developed world. Haiti is a nation with the capacity to produce rice and was at one time self-sufficient in meeting its own needs. At present, Haiti does not produce enough to feed its people; 60 percent of the food consumed in the country is imported. Following advice to liberalize its economy by lowering tariffs, domestically produced rice was displaced by cheaper subsidized rice from the United States. The Food and Agriculture Organization describes this liberalization process as being the removal of barriers to trade and a simplification of tariffs, which lowers costs to consumers and promotes efficiency among producers. Opening up Haiti's economy granted consumers access to food at a lower cost; allowing foreign producers to compete for the Haitian market drove down the price of rice. However, for Haitian rice farmers without access to subsidies, the downward pressure on prices led to a decline in profits. Subsidies received by American rice farmers, plus increased efficiencies, made it impossible for their Haitian counterparts to compete. According to Oxfam and the International Monetary Fund, tariffs on imports fell from 50 percent to three percent in 1995 and the nation is currently importing 80 percent of the rice it consumes. The United States Department of Agriculture notes that since 1980, rice production in Haiti has been largely unchanged, while consumption on the other hand, is roughly eight times what it was in that same year. Haiti is among the top three consumers of long grain milled rice produced in the United States. As rice farmers struggled to compete, many migrated from rural to urban areas in search of alternative economic opportunities.


Impact on nutrition

One peer-reviewed research suggests that any effects of US farm policies on US obesity patterns must have been negligible. However, some critics argue that the artificially low prices resulting from subsidies create unhealthy incentives for consumers. For example, in the US,
cane sugar Sucrose, a disaccharide, is a sugar composed of glucose and fructose subunits. It is produced naturally in plants and is the main constituent of white sugar. It has the molecular formula . For human consumption, sucrose is extracted and refined ...
was replaced with cheap
corn syrup Corn syrup is a food syrup which is made from the starch of corn (called maize in many countries) and contains varying amounts of sugars: glucose, maltose and higher oligosaccharides, depending on the grade. Corn syrup is used in foods to soften ...
, making high-sugar food cheaper; beet and cane sugar are subject to subsidies, price controls, and import tariffs that distort the prices of these products as well. The lower price of energy-dense foods such as grains and sugars could be one reason why low-income people and food insecure people in industrialized countries are more vulnerable to being overweight and obese. According to the
Physicians Committee for Responsible Medicine The Physicians Committee for Responsible Medicine (PCRM) is a non-profit research and advocacy organization based in Washington, D.C., which promotes a plant-based diet, preventive medicine, and alternatives to animal research, and encourages ...
, meat and dairy production receive 63% of subsidies in the United States, as well as sugar subsidies for unhealthy foods, which contribute to heart disease, obesity and diabetes, with enormous costs for the health sector. Market distortions due to subsidies have led to an increase in corn fed cattle rather than grass fed. Corn fed cattle require more antibiotics and their beef has a higher fat content.


Cross-border movement of businesses

Tariffs on sugar have also caused large candy makers in the US to relocate to Canada and Mexico, where sugar is often half to a third the price. The Dominican Republic Central America Free Trade Agreement (CAFTA), though, has had little impact in this area. The sugar issue causing alarm had reasoning due to what plausible effects could come through the tariffs as well as the undetermined future of these types of negotiations considering sugar importation in the United States. Due to various continuing disputes in trade, Mexico began to have fewer exports of sugar into the United States, where the North American Free Trade Agreement (NAFTA) allowed. Those who left and sought out other companies for sugar have leaned marginally more towards Canada than Mexico. The tariffs are what keeps the large pressure from competition from south of the Rio Grande at bay.


Non-farming companies

Subsidies are also given to companies and individuals with little connection to traditional farming. It has been reported that the largest part of the sum given to these companies flow to multinational companies like food conglomerates, sugar manufacturers and liquor distillers. For example, in France, the single largest beneficiary was the chicken processor Groupe Doux, at €62.8m, and was followed by about a dozen sugar manufacturers which together reaped more than €103m.


Public economics implications

Government intervention, through agricultural subsidies, interferes with the price mechanism which would normally determine commodity prices, often creating crop overproduction and market discrimination. Subsidies are also an inefficient use of taxpayer's money. For instance, in 2006, the Department of Agriculture estimated that the average farm household income was $77,654 or about 17% higher than the average US household income. From a public economics perspective, subsidies of any kind work to create a socially and politically acceptable equilibrium that is not necessarily
Pareto efficient Pareto efficiency or Pareto optimality is a situation where no action or allocation is available that makes one individual better off without making another worse off. The concept is named after Vilfredo Pareto (1848–1923), Italian civil engine ...
.


Environmental implications

A study by the UN Food and Agriculture Organization found 87% of the $540bn farmers given every year between 2013 and 2018 in global subsidies are harmful to both people and environment. The monoculture system associated with subsidized large-scale production has been implicated as a contributory factor in
Colony Collapse Disorder Colony collapse disorder (CCD) is an abnormal phenomenon that occurs when the majority of worker bees in a honey bee colony disappear, leaving behind a queen, plenty of food, and a few nurse bees to care for the remaining immature bees. While ...
which has affected bee populations. Bee
pollination Pollination is the transfer of pollen from an anther of a plant to the stigma of a plant, later enabling fertilisation and the production of seeds, most often by an animal or by wind. Pollinating agents can be animals such as insects, birds, ...
is an essential ecosystem service essential for the production of many varieties of fruits and vegetables. Subsidies often go towards subsidising meat production which has other nutritional and environmental implications; and it has been found that out of the $200Bn subsidies to subsidise crops from 1995 to 2010 around two-thirds of this went to animal feed, tobacco and cotton production. On the other hand, farmers producing fruits and vegetables received no direct subsidies. The
environmental impact of meat production The environmental impact of meat production varies because of the wide variety of agricultural practices employed around the world. All agricultural practices have been found to have a variety of effects on the environment. Some of the environmen ...
is high due to the resource and energy requirements that go into production of feed for livestock throughout their lifespan, for example, a kilogram of beef uses about 60 times as much water as an equivalent amount of potato. The subsidies contribute to meat consumption by allowing for an artificially low cost of meat products.


Alternatives

Neoliberals argue that the current subsidies distort incentives for the global trade of agricultural commodities in which other countries may have a comparative advantage. Allowing countries to specialize in commodities in which they have a comparative advantage in and then freely trade across borders would therefore increase global welfare and reduce food prices. Ending direct payments to farmers and deregulating the farm industry would eliminate inefficiencies and deadweight loss created by government intervention. However, others disagree, arguing that a more radical transformation of agriculture is needed, one guided by the notion that ecological change in agriculture cannot be promoted without comparable changes in the social, political, cultural and economic arenas that conform and determine agriculture. The organized peasant and indigenous based agrarian movements, e.g.
Via Campesina La Vía Campesina (from es, la vía campesina, ) is an international farmers organization founded in 1993 in Mons, Belgium, formed by 182 organisations in 81 countries, and describing itself as "an international movement which coordinates peasa ...
, consider that only by changing the export-led, free-trade based, industrial agriculture model of large farms can halt what they call the downward spiral of poverty, low wages, rural-urban migration, hunger and environmental degradation.


See also


Subsidies For All!
* Perverse agricultural subsidies *
Protectionism Protectionism, sometimes referred to as trade protectionism, is the economic policy of restricting imports from other countries through methods such as tariffs on imported goods, import quotas, and a variety of other government regulations ...
*
Free trade Free trade is a trade policy that does not restrict imports or exports. It can also be understood as the free market idea applied to international trade. In government, free trade is predominantly advocated by political parties that hold eco ...
*
Agricultural policy Agricultural policy describes a set of laws relating to domestic agriculture and imports of foreign agricultural products. Governments usually implement agricultural policies with the goal of achieving a specific outcome in the domestic agricultu ...
*
Price support In economics, a price support may be either a subsidy, a production quota, or a price control, each with the intended effect of keeping the market price of a good higher than the competitive equilibrium level. In the case of a price control, a pr ...
* Farm gate value *
2007–2008 world food price crisis World food prices increased dramatically in 2007 and the first and second quarter of 2008, creating a global crisis and causing political and economic instability and social unrest in both poor and developed nations. Although the media spo ...
*
Electrical energy efficiency on United States farms Electrical energy efficiency on United States farms covers the use of electricity on farms and the methods and incentives for improving the efficiency of that use. U.S. farms have almost doubled their average energy efficiency over the past 25 ye ...


References


Further reading

* Farm Commodity Programs: A Short Primer, a
Congressional Research Service The Congressional Research Service (CRS) is a public policy research institute of the United States Congress. Operating within the Library of Congress, it works primarily and directly for members of Congress and their committees and staff on a ...
Report for Congress, 20 June 2002.


External links


You Are What You Grow
– Article on farm subsidies from ''
The New York Times ''The New York Times'' (''the Times'', ''NYT'', or the Gray Lady) is a daily newspaper based in New York City with a worldwide readership reported in 2020 to comprise a declining 840,000 paid print subscribers, and a growing 6 million paid ...
''. {{Authority control Agricultural policy